Tuesday, November 06, 2012

Election Outcomes: My Thoughts

I have already described the reasons why I should not be disappointed at Obama's reelection and why I am. There is a third question I should have asked and didn't, also relevant to my feelings—not the consequences of Obama winning but the implications of the fact that he won. His campaign made heavy use of soak the rich rhetoric, much of it, I think, deliberately dishonest; if he ever mentioned that higher income people pay, on average, a larger fraction of their income as federal income tax than lower income people, or that the bottom half of the income distribution pays essentially no federal income tax, I managed to miss it. (For my view of complications that those facts obscure, see an earlier post). The fact that that rhetoric worked at least well enough to get him elected—despite a collection of negatives that one might have expected to defeat him—is disturbing for what it might imply about the future. It is made only a little less disturbing by the fact that the popular vote looks to be split very nearly evenly—Romney may even win it.

But there is good news as well. It looks as though two of the three attempts to legalize marijuana—Colorado and Washington but not Oregon—are succeeding; they are ahead by sizable margins with about half the districts reporting. That will be the biggest defeat the War on Drugs has suffered in my lifetime. If, optimistically, it is the beginning of the end, that could be more important than which of the candidates I wanted to lose did.

It also looks as though Jerry Brown's attempt to raise my taxes may fail, although that is less clear; the vote is currently 51.8 against, 48.2 for, with only 16.8% reporting. The revision of the three strikes law, which I am in favor of, is winning by a sizable margin, although again that is with most of the vote not yet reported. The results on other ballot measures are mixed.

It looks, from a quick scan of the politico.com map of election results, as though Gary Johnson is going to end up with a little over 1% of the vote. That is nowhere close to the 5% he was shooting for, but I never expected him to get it; it is a pretty respectable showing for a third party candidate in a tight election. Perhaps equally important, in Ohio, the state that got Obama's electoral vote total past the magic 270 point, the margin of victory was only .2% and Gary Johnson got .9%. It is not clear whether Johnson was responsible for Obama's win—polling evidence suggested that he was going to pull votes from both sides. But it is clear that if those votes had gone to Romney he would have won Ohio. Whether that would have given him the election we do not yet know.

And, on an almost but not entirely different topic ... . Obama's win means that he is probably going to be able to appoint one or more Supreme Court justices, one of the arguments some libertarians offered for supporting Romney. It occurs to me that one possible candidate is my ex-colleague Cass Sunstein, a distinguished law professor with an important position in the current administration.

It would be a very interesting appointment. On the one hand, he is smart and charming, which would make him influential on the court, which could be a bad thing if he supports the sort of positions Obama would want him to support. On the other hand, he would be a wild card—an independent thinker who might easily come down on what I would consider the right side of some of the issues the court will face.

11 Comments:

I've caved and written something about the marijuana issues at my blog: http://powercomments.blogspot.com/2012/11/a-new-meaning-to-phrase-rocky-mountain.html

Basically, the next four years will be an interesting test of Obama's true colors on marijuana prohibition. I don't think Obama will show any consideration for, let alone any political will to change, the more important issues of opiate and cocaine prohibition.

I have an especially high regard for David's judgment, as he knows. However, in regard to to the Sunstein "thought", I recall David's favorable, albeit, preliminary views of Candidate Obama's economic advisors (or at least certain of them) back in 2003. We saw how that worked out in real time. Notwithstanding the independent thinking attributed to Professor Sunstein were he to be appointed, I expect a similiar outcome. I can recall only David Souter in somewhat recent times as an appointee who performed in a radically different mode than expected. It is this feature of the Obama re-election, the federal judge/justice appointment process, that I fear the most in the election outcome. And given the Senate makeup, I see no practical balance in it.

Yes, I suspect President Romney would have appointed "government-out-of-the-boardroom" justices who by-and-large pleased you (if not me). President Ryan might be more problematic for both of us, since he represents the "government-in-your-bedroom" wing of the party.

We owe the surveillance state largely to G.W.Bush and 9/11, but Obama hasn't done anything to dismantle it, and I don't expect Romney would have either.

Your comments about Ohio were premature; the latest count has Obama ahead by over 100,000 votes there while Johnson got only 45,000 votes. And Obama would have won in the electoral college even if Ohio had gone the other way.

http://www.politico.com/2012-election/results/president/ohio/

Your comments about the popular vote were also premature -- not surprising, since you made them before most of the West Coast vote was counted. (Why does the media even bother reporting nationwide numbers when not everyone in the nation has voted yet? It clearly misleads viewers, including you.) As of this morning, Obama leads the popular vote count by about 2.7 million votes, and there are still many uncounted votes in WA and OR.

The CBO itself attributes the corporate tax to owners of capital."CBO assumes that corporate income taxes are borne by owners of capital in proportion to their income from interest, dividends, capital gains, and rents. Over the long term, however, some models suggest that at least part of the burden falls on labor income."publication: Average Federal Taxes by Income Groupon: http://www.cbo.gov/publication/42870

In other words, the CBO disagrees with Obama and Buffett, who attribute 0% of the corporate tax to shareholders. Their roadshow, with Buffett's secretary even sitting with the Obama family during the SOTU address, looks like a big fraud. Deliberate misrepresentation of an issue under federal jurisdiction is technically a violation of 18USC1001.

NAIVELY SPEAKING, the corporate tax takes from the shareholders. They own the account from the which the money comes. This approach is intuitively appealing -- especially to shareholders! (If someone robbed you, you would say that they took your money.)

On the other hand, you can calculate the "INCIDENCE" of taxes on various groups by doing a "comparative statics" calculation with and without the tax. Of course, to be fair, this calculation needs to be performed on all taxes. So then, maybe labor pays some of the corporate tax, but it could also turn out the shareholders pay some of the payroll taxes, etc. Moreover, this kind of analysis can also reveal an "inefficiency factor" in taxation. It might show, for example, that the public pays $1.50 for every $1 the government collects (due to taxes suppressing GDP). There could be a number of horrors lurking in there. I've never seen a presentation where someone actually attempted to do this kind of calc.

Another freako possibility is that, if labor is shown to truly bear too high a percentage of the corporate tax, Obama might want to reduce the corporate tax rate because he's in love with labor.

So we have two ways to attribute taxes to individuals: (1) a "naive way" (used by most people, including the CBO), and (2) the "tax incidence way". When making comparisons, we should be careful to not mix the two ways. (Otherwise, you can get the results you want by selecting the advantageous way for your friends, and the disadvantageous way for your enemies.)

My proposed rules for the "naive attribution" of taxes:(1) When a tax is paid by a corporation or by an individual as a function of a payment from the corporation to the individual (or from the individual to the corporation), the tax is borne by the individual. (This assigns the payroll tax to employees, and the sales tax to the customer.)(2) When a business is taxed on its profits, the tax is borne by the individuals that own the business. (This would assign the corporate tax to shareholders.)

"Naive attribution" is a semantic issue -- how you do it is arbitrary. You need a way that results in analyses that are useful. "Tax incidence by comparative statics" gives a rigorous result, but the analysis is extremely difficult, and the results could be questioned.

There's a moral issue connected with claiming that when I steal from your account, I'm really stealing from everyone. If I'm stealing only from you, then you are a legitimate "complaining victim". If I steal from your account, but it is judged that I have stolen from everyone, then your complaint is diluted down to nothingness. I think this is the reason why guys like Obama and Buffett might like to think that "everyone pays the corporate tax."

Of importance in California, not only did Prop 30 pass, showing the naivete' of a good proportion of California voters, but many- perhaps most- in the state legislature who helped run the state into the ground were re- elected by wide margins.

That includes our local state assembly guy, re- elected to his fourth term (he was a state senator for two terms), another state assembly guy elected to congress and Dianne Feinstein, as well. All were elected with over 65% of the vote.

Not good as it shows, at least with Californians, that they're satisfied with the status quo.

As far as Gary Johnson, some are using his vote total as a high point: 1% of the vote being higher than most LP presidential candidates have received. I'm not impressed, though I don't blame it on Johnson.

With his credentials, the media coverage he did receive and the quality of his lame major party opponents, I would have expected higher totals.

This should have been the ideal time for someone like him. I didn't expect him to get 5%, but I didn't think 1.5 or a little beyond was out of reach. I'm almost of the feeling that 1% was a serious loss under the circumstances.

But I'll vote for him again next time, should the opportunity arise. As a libertarian I'm used to losing.

Anonymous, I don't think that the calculation of the incidence of corporate taxes can actually be as "rigorous" as you would like, because the result is specific to each unique industry segment. Depending upon competitive factors, which vary among industries and even among submarkets, the tax is borne in some proportion by shareholders (in the form of lower returns on investment), workers (in lower wages) or customers (in higher prices). Who actually bears the tax is a function of the relative strength of the (implicit) bargaining position of each of those three groups. Furthermore, that will necessarily change over time in a dynamic economy. So I submit that it is impossible to calculate the incidence of the corporate income tax with any degree of confidence. It's always going to be a judgment call, which necessarily turns on the biases of whoever is making it.

What's really important is not the actual incidence of the tax, but simply the fact that entity-level taxes are never borne by the entity itself, but rather by actual human beings. Corporations may be fictional persons, but they never truly pay taxes; they are mere conduits. This point is never made clear to the general public, which seems to view businesses as vast wallets to be tapped. If they can ever be made to understand the truth the allure of corporate income taxes would vanish, and our tax system could me made more rational and economically efficient.

With respect to: "The first is the empirical question—is there evidence that immigrants in fact impose net costs on the U.S. tax and spending system? I think the answer is no, although it is not a question I have looked into in any detail."

I am ambivalent on the whole immigration question, but the phrasing here puzzles me with its seeming glibness. If you think the question is relevant to the issue, why not look into it?

The Center for Immigration Studies ("Low Immigration, Pro-Immigrant") posts a study based on census data. One thing that sticks out:

[quoting] In 2010, 36 percent of immigrant-headed households used at least one major welfare program (primarily food assistance and Medicaid) compared to 23 percent of native households.

Among the top sending countries, welfare use is highest for households headed by immigrants from Mexico (57 percent), Guatemala (55 percent), and the Dominican Republic (54 percent); and lowest for those from Canada (13 percent), Germany (10 percent), and the United Kingdom (6 percent).[end quote]

CIS has an agenda, fine. But (on the other hand) they seem at least interested in figuring out an answer to your "empirical question".